--Practice Manager, Professional Services Company

The New E-Factor

Ethics is about right conduct. The Better Business Bureau (BBB), whose own mission statement is “to promote and foster the highest ethical relationship between businesses and their customers,” is one resource with a local office that serves Eastern Washington, North Idaho and Montana. The BBB provides codes for advertising, online business practices and other guidelines, and the local Spokane office has files of challenged practices and a non-responder list of regional businesses that ignore BBB consumer complaints.

Bad service, poor products, confused expectations and misrepresented financial statements are the most common ethics problems. Throughout history the response to these destructive practices has been varied. For investors, misrepresented financial statements have received serious focus. Business Week reports national research that almost 50 percent of company accountants have been asked to misrepresent their business by their managers. The bottom line is more than financial: someone not “acting right” affects businesses, employees and customers. Because of financial isrepresentations, today’s call to more ethical behavior comes in the form oflegislation (such as Sarbanes-Oxley), ethics codes, zero tolerance and drug testing – to name a few methods. These are complex and costly ways of insuring people behave appropriately in the workplace. So why are some businesses afflicted with ethics problems and others are not?

There are several approaches business owners can take to foster ethical behavior in the workplace. One is to list what one can and cannot do, and act on the rule. This is found in policy and procedure manuals, and sometimes summarized on a plaque on the wall. Another method is for an owner to say nothing and expect employees to learn what’s right by osmosis. The third way is for an owner to talk and behave in a manner that makes expectations clear – setting an example for everyone else with his or her observable behavior.

It’s one thing to hear an owner expound on virtuous behavior, but quite another to hear employees and customers verify how the company “acts right.” The Inland Northwest has many good examples of companies admired by customers and employees because of their ethical behavior. These businesses integrate ethical behavior from their owners; spread it through the workforce, and then on to their customers.

Trust - Assumptions About the Nature of People

A common denominator of ethical businesses is the evident respect and trustworthy relationships within their companies. The Spokane business owners interviewed all have core people who are not cynical about others. Some of these local businesses are second-generation organizations that have been successful for decades despite some rough times. The companies range in age from two years to more than 50, and the number of employees range from one to 240. No matter the size, trust is an important element of how they do business.

“People want to do a good job for their boss. If you treat them well, they do a good job for you,” says Carol Bjork, owner of HeyCats! Web Solutions who uses sub-contractors as her workforce. This principle was also emphasized by Greg Mahugh, senior vice president and general manager of DAA Northwest Auto Auction. “There’s a basic desire of people to live well,” he says. People thrive in environments where they and their colleagues can be responsible and accountable. Mahugh’s belief in people is evident when he discusses the importance of the “Sunday face” and the “Monday face” to describe consistent practices on and off the job. He represents several of his fellow business leaders when he talks about forgiveness and second chances. He’s no pushover, but an empathic, reasonable man who can help employees bring out their best character traits. You would never expect to see him mindlessly pursuing a policy of abundant zero tolerance, or one that would bring on disastrous unintended consequences. Likewise, Ken Hearron, owner of Administrative Services, Inc., says, “Deep inside, people like a workplace that isn’t fraught with shucking and ducking.” Hearron teaches accountability by working individually with his employees as teachable moments arise.

Not everyone makes a non-cynical assumption about people. According to local psychologist Dr. Laura Asbell, about 20 percent of the population falls into the narcissist or sociopath category. These are people who, among other difficulties, believe they are number one and that others are out for their own best interests. They cannot believe there are people who put other’s interests before their own. Mix these types of people into a workplace of open and honest people, and the image of the wolf in sheep’s clothing comes to mind.

People who own and work in local, successful small and mid-size companies have figured out how to make sure self-centered people don’t fit in. When someone states a principle and shows a “wink-wink, nudge-nudge” response, the reaction from co-workers and owners is usually one of surprise and disdain – “That’s not how we do it here.” Employees either fall in line or eventually decide they’re in the wrong place. So whether the problem is education, awareness or belief system, those who don’t fit the culture of well-demonstrated ethics usually change or weed themselves out. As Joe Zubaly, president of Northwest Plant Healthcare who employs 16 people, says, “We have to help the new guys be clear on how we do things here.” Some employees have worked in places where accountability and responsibility are not important. They may have been in a place where cutting corners was the way to do things. Therefore, it’s vital that business owners not just demonstrate but also show others how to properly act in real situations. Then make sure the underlying values are clear and trust employees to act in the same ethical manner. There’s a generosity and maturity in these workplaces that shows in subtle ways. It’s not about locks on supplies or the tedious tracking of time; the emphasis is on accountability for results.

A Practice, Not Just a Poster

Ethics is not what’s on a wall poster; it’s what is practiced. Who isn’t in favor of honesty, integrity and ethics? The real question is: how do you practice your ethics? Whether or not a mission statement or code of conduct is listed on a plaque or the back of a business card is not important. The important thing is that people throughout the company, and even the customers, can describe in their own words what those values are and what they really mean. “If you have lists you have loopholes,” says Jim Elmer, owner of James W. Elmer Construction. Elmer integrates ethics into the workplace through more than just framed ethics statements. He visits job sites and meets with project managers to help settle the inevitable difficulties in the work of a general contractor. There’s a reason he enjoys so much return business from customers.

Teaching Ethics

Employee barbeques and meetings are effective ways to reinforce what employees regularly see in the workplace. Rob Linford, president of DIVCO , a commercial heating and air conditioning business, tells employees, “We don’t raise the price because we can, we raise it because our price increases.” He reinforces the importance of working with customers, and refers to small school districts as an example of customers who need help figuring out how to maximize their budgets. By observing owners in action, employees receive messages such as: Don’t talk negatively about our competitors; Every day you’re faced with the opportunity to cheat a little, you don’t; We don’t make up results, it is what it is; We have to make it fair for everyone. This informal, yet intentional, way of teaching ethics is powerful and effective. It also reinforces the idea that everyone is part of the company’s success.

One owner noted the deterioration in ethical behavior when the business grew too big for the face-to-face owner-employee experience: “We got too big. If people didn’t have direct contact with us we started looking like any other business.” Company leaders realized this problem and moved quickly to correct it through orientation programs, as well as formal and informal gatherings for employees to learn about the company’s values and priorities. In discussions employees can ask and explore owner priorities related to customer service, account flexibility and profit maximization. What these owners teach through these conversations are judgment and decision-making skills. This can’t be taught through a multiple choice or true/false text. The intentional, informal method ensures employees understand and can make decisions that make the company owner proud. And in the process, employees can take more pride in their contribution to the business’ success.

When local employees talk about their companies there’s not just an appreciation for what they were taught, but the way they were taught about ethics. One shared a story about meeting with an impressive and wealthy client who told the owner what the results of his work should be. According to the employee, “The owner said without hesitation, it is what it is. That was the first time I had heard that statement, but have heard it [many] times since. This shows…we value honesty, not being persuaded by customers to ‘hit the number’.”

Culture of Ethics

Many local businesses have high-stakes work environments. They handle secure documents, heavy equipment and expensive materials. But some owners don’t need to rely on drug tests or signed ethics statements. They live their trust approach and have confidence in the work culture they’ve fostered and how their people were trained. According to several owners, they can rely on employees to do what’s right because it’s “too difficult to do otherwise.” Fellow employees won’t tolerate pilfering, broken promises, cheating or not putting in a full effort.

Employees of Scot Auble, president of Auble, Jolicoeur & Gentry, recall several examples of situations in which a customer wanted a particular outcome from an appraisal, but in case after case the company leaders showed how to focus on doing the job right and not being pressured to change results to “hit a number.” Auble credits his father for the company’s integrity and his own ability to create teachable moments for his colleagues.

These employees and owners strive to do the right thing. Frequently thousands of dollars are at stake – something has been built wrong, damaged, equipment isn’t what is really needed or a variety of “not our fault” problems occur. The companies could have walked away, but chose to stay and work through the difficulty. They’ve also spent their company resources to help a customer through unforeseen problems. They did this because they’re in business for the long term; just as they trust their employees, they want their customers to trust them. Most of their employees know the company values well enough, they can tell when there’s flexibility to solve a problem. Their karma perspective of “what goes around comes around” means they actively contribute to an ethical culture both within and outside their companies.

However, two major problem areas in the ethics arena are taking shortcuts, usually because of time constraints and poor planning, and outright misrepresentation of the company.

No Short Cuts

Local BBB president Jan Quintrall says companies that receive frequent complaints are those that have taken short cuts, which produced undesirable outcomes. These businesses are pressured by time and agree to do a job without considering if they can realistically deliver what they promise. It’s as though the only focus was on short-term financial gain, with no consideration of the long-term effects or ethical aspects. In order to prevent short cut temptations, ethical companies must sometimes turn down customers because of the limited time available to complete the work, the company’s expertise isn’t a good fit for the customer, the customer’s request seems unethical or the owner simply has a negative vibe or “gut feeling” that things will not turn out well.

Trust Your Instincts

Owners must trust their “gut” when it comes to hiring and retaining employees, as well as contracting with customers or suppliers. After you’ve been in business long enough, a second sense or instinct develops about situations and people. Whether an owner can describe exactly what seems amiss, or just relies on knowledge and past experience to predict an unsuccessful outcome, it’s best to trust your business instincts and avoid the situation. Quintrall recalls a complaint against a business that, when investigated, showed a difficult customer as much as a difficult owner. As the case progressed, the owner lamented to Quintrall, “I knew I should never have agreed to do that job.” Another example is Bjork who works with sensitive data and timelines at HeyCats! Web Solutions. She subcontracts with impeccable care, but still does a “gut check” for a first and final analysis.

Misrepresentation

Another difficulty, usually for employees, is being asked to misrepresent financial situations for a variety of reasons. One former employee told a distressing story: after alerting his employer about an accounting discrepancy, the worker was manipulated into remaining silent about the issue. As a result, the employee quit that job, and the company lost an ethical employee. Moreover, that employer opened the door to unethical practices, which can be used against the company. If an employee is unethical with customers, there’s no reason to assume the employee will be ethical in dealing with the employer. An example is one employee who took home thousands of dollars in supplies from the workplace. These supplies weren’t even going to be used, but it was a way for the employee to vent frustration and “get back” at the alleged unfair employer. In a privately held company, speaking up can attract ridicule for those workers or even risk their position. Because of this, employees may be reluctant to point out bad news. Ensure a safe environment and be thankful for opinions or data, instead of irritated or annoyed. This will go a long way towards creating an ethical workplace with no surprises.

Good Business is Good for Business

It’s obvious customers, employers and employees lose over the long haul when the environment is unethical. Granted, there are short-term losses; however, the long-term benefits of being trusted by employees and customers are priceless. Not only do you not have to spend energy manipulating, hiding and remembering what you said that wasn’t true; you don’t have to work with unethical people who treat you poorly.

An analysis of 52 national and international studies over 30 years by researchers at the University of Iowa and University of Australia have confirmed the positive correlation between financial success and social responsibility in their work. According to Wikipedia.org, “Corporate social responsibility (CSR ) is an expression used to describe what some see as a company’s obligation to be sensitive to the needs of all of the stakeholders in its business operations.” Not only is it related to corporate citizenship, treatment of customers and employees and the role of the business within its surrounding community, but CSR is also linked to philanthropy and the principles of sustainable development. Social responsibility is part of an ethical approach to business, and research shows the long-term benefits of an ethical workplace and its ties to economic growth.

Most business owners are aware they aren’t perfect. Yet, it’s important to have core values to embody and teach others. Owners shouldn’t be nitpickers, but it’s okay to have a few “over my dead body” rules, as long as they are made clear for employees. Some owners are as quick to terminate an employee, as they are to give them a second chance if it makes sense. Their business success is due to thoughtful consideration about what’s important and what they can do about it. For example, one owner recently fired a manager who told a worker to not expose the real reason for an accident. The truth is non-negotiable for the owner, particularly because she would have worked with the manager to improve the system that contributed to the accident.

Checklist

Owners and managers generally believe employees know more than they actually do when it comes to values, ethics and how business should be done. Employers sometimes get so busy or assume employees think like they do. It might be more useful to assume everyone has a different background; what got an employee in trouble in one place might not be a problem in another. Things that weren’t a problem with one employer would be out of bounds with another. The best approach: even if you think people know how to act right in your business, they might not. Just to be sure, consider this checklist of actions.

When was the last time you:

• Had a conversation about what “honesty” means in your company?
• Explained why something should or should not be done because that action was the right thing to do?
• Made a decision that was best for both you and the customer or employee, or “left something on the table” even though it cost you financially?
• Worked with employees to improve their sense of fairness?
• Showed the difference between being tough and being compassionate?
• Expressed appreciation for success based on high values and high performance?
• Thanked someone for bringing you truthful bad news?

No matter where your business is in the discussion and implementation of ethics, it’s never a moot issue. There are a number of books, Web sites and other resources to help you, including the Gonzaga Ethics Institute. Ethics doesn’t have to be intimidating or fancy, it’s just how we treat people. And treating someone “right” is always a good way to conduct business.

© Lunell Haught, PhD, CMC